A trader needs to have an understanding of information that can’t be extracted from usual price charts. So, they use technical analysis tools to gain additional insight. Although the tools can give information and suggestions, they can sound almost like a foreign language. It’s so important for a trader to have a basic knowledge of these tools. And once explained, they truly help traders make better-informed trading decisions, giving them ammo to aim at the market.
When as a trader, you hear the words "technical analysis," it’s common to sweat and get a little nervous because they are a bit complicated to use. But, it does seem that we make it more complicated then it needs to be. As humans, we tend to overcomplicate things naturally and make everything more nerve-wracking than it needs to be. If we as traders prepare ourselves with the knowledge on how to use these tools properly, then we can use them to help ourselves.
There are heaps of technical analysis indicators out there available to help benefit traders, and we can add them to our charts to help our performance. I will go over some of the more commonly used tools traders use, and some of not-so-common tools as well so you don’t feel blind-sighted when you hear of them going through your education. One of the most commonly used indicators is called MACD which means "Moving Average Convergence Divergence." I know the name itself sounds intimidating, but knowing what it does makes it less scary. The MACD uses moving-average lines to give you a visual change in price changes. You don’t need to understand the math behind the tool, but knowing how it works will give you a shot at being better positioned to avoid getting fooled by false signals. Another common indicator is RSI which stands for "Relative Strength Index, and it's a very popular momentum indicator. It's known to be among the easiest to use for traders. It measures the overbought or oversold levels on a scale of 1-100. Watching for certain readings should help gauge decisions you make, not allow you to rely completely on what they show.
One unpopular tool you might not have heard of unless you’re a part of The Apiary Fund community, and have heard Shawn Lucas talk about something called the "Wobble Technique." Shawn Lucas started this and he has used it to perfection. I’m still learning how to use the Wobble, and I’m hoping to apply it to my trading strategy. I hope this has given you some insight into why you need to inform yourself of these tools and what they can do for your overall performance as trader. Good luck and happy trading!